The Food & Drug Administration (FDA) now says “by the end of 2023” will be their announcement date of final regulations for the ban of menthol tobacco products and flavored cigars. If this new timetable and the FDA’s 12-month enactment period are the mileposts, c-store chains and independents now have all of 2024 to figure out the best way forward for their tobacco sections.

Shrink or Change?

Chains and franchisees have already begun exploring new tobacco shelf sets. The key measure will be customer loyalty along with volume, velocity and profit. California — where bans are already in place — is not the same as Indiana, but it provides a look at some best practices for a three-step process of removal, replacement and reset. For example: stay current with your vendors’ plans and allow enough time for inventory changeover.

Projected nationally, removal of banned SKUS will reduce the cigarette section by 30% and the cigar section by half; around 8 million facings across 148,000 c-stores. Replacement will include non-menthol cigarettes, other tobacco products (OTP) and vape SKUs that most likely didn’t have the shelf velocity to make the cut under prior planograms. There will also need to be intrusion by more premium cigars, new nicotine SKUs, along with nicotine-free menthols and flavored smokes outside of current FDA rulemaking.

An analysis from August 2022 projected a 25% loss in tobacco merchandise sales. The expert advice at the time was to re-focus the backbar on a range of non-tobacco nicotine alternatives like oral products, heat-not-burn and new OTP offerings. It’s still too soon to know if that will work. I noted at the time that we could just call it the “Nicotine Section” and move on.

The great replacement of flavored cigars and menthol cigarettes will trend to the FDA’s belief that nicotine dependency is preferable to tobacco’s harmful ingredients.

Forget for the moment that smoking a cigarette is enjoyable and pouches don’t come with a smoke break.

Flavor-Centric Rulemaking

In response to menthol and flavor bans, we’re moving away from tobacco pleasure toward nicotine satisfaction. The removal of menthol and flavors from cigarettes and cigars will only reduce smoking frequency if a meaningful portion of future shelf sets are nicotine-free.

The question is how much will disappointed menthol smokers’ usage decline when nicotine-free, non-tobacco menthols becomes the only choice?

Start With The Smoker

Over the years, my approach to new products has always been to start with the consumer. They’ll tell you what they want, what it means to them, and how they want to feel about themselves. Enzo Ferrari once said, “I don’t sell cars. I sell engines. The cars I throw in for free since something has to hold the engines in.”

Around half of menthol smokers tell us nicotine doesn’t matter as long as the taste is right. Most of them would rather quit than smoke a regular cigarette. Neural resistance to nicotine varies from smoker to smoker, and can be an indicator of how many can quit versus staying with the taste and the moment.

In order to attract and sustain a nicotine-free smoking audience, marketing will need to improve.

Nicotine-free menthol taste will be pretty close to tobacco based smokes. The packaging, promotion and social media will need to “sell the engine.” A dedicated nicotine-free retail section will show us whether it’s the menthol or the nicotine.

This will also give retailers a fast fix on velocity after the first couple of packs. Nicotine-free flavors and menthol will not achieve the volume or velocity of the tobacco SKUs they replace, but the absence of excise taxes can rebalance the profit equation.

The Centers for Disease Control and Prevention (CDC) data says that 65% of cigarette smokers want to quit. I think they really don’t. They’re more exact concerns are escape from addiction, and health concerns over toxins in tobacco. That’s different.

An Afterthought

Perhaps of longer-term importance is proposed rule-making to cap cigarette nicotine levels. This will be published soon after menthol and flavor bans are formally issued. This will be a process that, if past is prologue, will take the industry into 2026 before we see any proposed final rules.

The nicotine cap is a Biden administration initiative and would require statutory changes by congress to the Tobacco Control Act (TCA). An interesting point here is that under the TCA statute, every nicotine-capped cigarette and cigar would be a “new” tobacco product under section 910(a), requiring application for a full Market Authorization. Reduced nicotine is not substantially equivalent.

Let’s not get caught up in this one yet, unless the FDA can figure out a workaround and a new congress is still interested in changing the law. It’s going to be several years before the FDA will be able to regulate caps on nicotine. Do we think the FDA can stick to a schedule?

John Geoghegan has spent the last 30 years in the tobacco business, including vice president strategic planning at General Cigar Co., U.S. manager for DjEEP Lighters, head of marketing for Kretek International Inc. and manager of LaMirada Cigar Co. He began his career 57 years ago at Procter & Gamble. Geoghegan is a graduate of the University of Cincinnati. He lives in Laguna Niguel, Calif.